Customer Risk Assessment


Although your risk register will reflect your businesses general risk profile, you can assess individual customers by comparing their characteristics and transactions with those listed in it. This will promote consistency of treatment of customers. You will need to assess individual customers and record such assessment but this does not have to be very detailed or difficult. The adaptation of a single row from the risk register is likely to be adequate.

The firms’ risk controls will include the customer due diligence measures that will apply to address the risks identified, plus systems to monitor transactions which may identify suspicious activity which may lead to these suspicions being reported. The first part of the client due diligence process therefore is to apply risk management measures to our clients’ circumstances.

In Summary of Risk Based Policies

Businesses can decide for themselves how to carry out their risk assessment of clients, which may be simple or sophisticated depending on the nature of their business. Where the business is simple, involving few service lines, with most customers falling into similar categories, a simple approach may be appropriate for most customers, with the focus being on those customers that fall outside the norm.

A risk-based approach can never, by its nature, be an error–free system. However, it ensures the most cost effective results by directing the attention of businesses to the risks relating to different customers and services, in order to determine what level of knowledge and verification is required when establishing a business relationship and in conducting that relationship. For most systems a simplistic 4 category type of assessment will suffice, though we must remember to remain flexible since risk may change as the circumstance of the client alters;

  • Low
  • Normal
  • High, and
  • Those by their very nature fall outside the norm

Section 7: Self assessment. This section in many ways may seem puzzling to the lower ranks of staff and seem to be of more use to seniors who formulate policies. However, the basic principals contained in this section helps all grades of staff formulate their own risks and suspicions concerning the area of the business they work or specialise in.

  1. Do you know how geographic considerations can increase risk?
  2. Do you understand the concept of long established customers being less of a risk than new customers?
  3. Do you know the simple 4 categories of risk?